Cruise Execs Debate State of Industry

March 5, 2003

The Seatrade Cruise Shipping Convention, taking place this week in Miami Beach, is the industry's largest international gathering. The main event, the State of the Industry Debate, gives an inside snapshot of today's cruising by the leading executives in the industry. While much of the discussion focuses on supplier and distribution issues, there are many insights into new products and programs of interest to consumers. Here are some highlights:

Are you putting off your cruise plans? The first quarter of the year, traditionally the super-busy Wave Period when many cruisers book their voyages for the upcoming year, has been slow due to fears about war and terrorism and the sluggish economy in the U.S. "Clearly, this has been a much more disappointing Wave Period than any of us had hoped for," said Richard Fain, chairman and CEO of Royal Caribbean Cruises Ltd., parent of Royal Caribbean International and Celebrity Cruises. What does this mean for you? Cheaper cruises in some destinations, as fares are slashed to fill the ships, especially as big new ships are introduced this year.

Although shipbuilding orders for new ships are down this year - due in part to the economic problems and the strength of the euro, which makes it more expensive to spend U.S. dollars at European shipyards - more new ships will be ordered. "I do foresee, going into 2005 and beyond, that we will see new ships, although they will be ordered at a much slower pace," said Howard Frank, vice chairman of Carnival Corp. Norwegian Cruise Line President Colin Veitch said his company will continue adding a ship a year, with next year's Project America ship earmarked for interisland cruises in Hawaii.

Fearful of flying to Europe this summer? Some cruise ships based in the Mediterranean Sea are seeing lackluster bookings so far - again, Middle East war fears being blamed - but some lines are vowing to keep the ships there rather than move them back to North America, as happened shortly after the 9/11 terrorist attacks. Fain said his lines will have five ships in Europe this summer. "I think absent something really quite dramatic happening, we will not expect to change that," he said, adding that fears about European travel are "overstated." Frank said Americans "have a better understanding of geography" than they did during the Persian Gulf tensions and war in the early 1990s. "We continue to believe the European program will be quite good this summer," he added.

Carnival Corp. and P&O Princess Cruises hope to close their merger deal by mid to late April, Frank said, but it will be 12 to 18 months before consumers see what, if any, changes will take place in the cruise brands.

While more of you are booking directly with the cruise lines, travel agents remain the primary sellers of cruises. The line appearing to book the most directly to consumers is Carnival Cruise Lines, which sold about 13.6 percent of its business directly to the consumer last year, President Bob Dickinson said. Industrywide, agents still sell 90 percent of cruises, and "you'll never see that figure be 80 percent, because we are not selling a hotel room, which is a commodity," unlike cruise accommodations, which "depend upon personal one-on-one interaction" between agent and customer.

You'll continue to see more cruise ships based in closer-to-home ports in the U.S. and Canada. NCL already operates from 13 North American homeports, and expects to add more in 2004 as part of its Homeland Cruising program, Veitch said. Dickinson said there also will continue to be more shorter cruises of three, four and five nights.

Even Crystal Cruises, a global line constantly traversing the world on longer itineraries, will visit more U.S. ports in the near future. "We're looking at shorter, round-trip seven-day cruises out of U.S. ports," Crystal President Gregg Michel said. The new Crystal Serenity, a 68,000-ton, 1,080-passenger ship scheduled for a June delivery, will spend the summer in the Mediterranean.

The excitement is building for the Queen Mary 2, the 150,000-ton, $800 million ocean liner Cunard is building in France. "We're thrilled to say the response has been terrific," Cunard President Pam Conover said. "It is different and unique enough that people want to be a part of something as special as this ship." No delay is expected yet in its delivery date in December, she said, despite some recent problems with the construction of propulsion pods.